The trial in this matter was
held on October 12, 1993 in Kalispell, Montana. Petitioner, Jonathan Sanford
(claimant or Sanford), was present and represented by Mr. Erik Rocksund.
Respondent, State Compensation Insurance Fund (State Fund), was represented
by Mr. Todd A. Hammer. Claimant and Dr. Randale Sechrest were sworn and
testified. Exhibit Nos. 1 through 11 were admitted into evidence by agreement
of the parties. Exhibit Nos. 12 through 15 were admitted over the objection
of the State Fund. The parties stipulated the following depositions can
be considered by the Court in reaching its decision: Jonathan Sanford,
Renee Sanford, Dr. David F. Friedrick, Dr. Lonnie E. Paulos, and Dr. Lawrence
Iwersen.

Claimant asks the Court to
set aside a full and final compromise settlement with respect to a knee
injury he suffered in 1989. He contends that there was a mutual mistake
of fact regarding the nature and seriousness of his knee condition.

Having considered the Pretrial
Order, the testimony presented at trial, the credibility of the claimant
and Dr. Sechrest, the deposition testimony and the exhibits, the Court
makes the following:

FINDINGS OF FACT

1. Claimant is presently 32
years old.

2. On December 30, 1989, he
was injured while working as a skidder operator in Lincoln County, Montana
for Brandon Owens, Inc. He slipped and fell backwards off the machinery
he was operating, injuring his right knee.

3. At the time of injury, claimant's
employer was insured by the State Fund, which accepted liability for the
injury.

4. Claimant was initially examined
by Dr. Mark Raine. Then on January 22, 1990, he was seen by Dr. Lawrence
Iwersen, an orthopedic surgeon. (Ex. No. 1.) Dr. Iwersen assumed his care.

5. Claimant's medical history
is significant in that he had a prior right knee injury and meniscectomy
when he was 17 years old.

6. Dr. Iwersen's initial diagnosis
was chondromalacia patella. He prescribed physical therapy. When the knee
did not respond to that therapy, the doctor performed diagnostic arthroscopy
on claimant on March 13, 1990. The arthroscopy did not identify any significant
abnormality other than the old lateral meniscectomy. During the arthroscopy
Dr. Iwersen visually observed, as well as probed, claimant's posterior
cruciate ligament (PCL), noting that it was intact.

7. Following the March, 1990
arthroscopic surgery the claimant continued to experience pain in his
knee.

8. A magnetic resonance image
(MRI) performed in May 1990, also showed the PCL to be intact.

9. Claimant was seen in consultation
by Dr. John Hilleboe, an orthopedic surgeon practicing with Dr. Iwersen,
on May 30, 1990. Dr. Hilleboe could find "no crepitus, no ligamentous
laxity associated with the cruciate testing or MCL or LCL testing. ("MCL"
and "LCL" presumably refer to the medial and lateral collateral ligaments.)
I looked at his MR[I] and I don't see any specific abnormality there either."
(Ex. No. 1, May 30, 1990 report by Dr. John Hilleboe).

10. Claimant was also seen
by Dr. Michael Sousa, another orthopedic surgeon, in the summer of 1990.
In a July 3, 1990 letter, Dr. Sousa stated "that this patient has some
instability secondary to cruciate ligamentous laxity
and patellar symptoms, possibly secondary to a painful bipartite patella
or chondromalacia patella." Dr. Sousa suggested claimant follow-up with
Dr. Iwersen, and suggested claimant "may require a cruciate ligament reconstruction
and/or a partial patellectomy to try to relieve his symptoms, but one
cannot 100% guarantee the results of such surgery in view of the injury."
(Ex. No. 1.)

11. When claimant's condition
did not substantially improve, Dr. Iwersen undertook a second arthroscopic
surgery on September 11, 1990, performing a partial patellectomy [partial
removal of the knee cap] due to a "painful bipartite patella." During
the surgery the doctor visually observed and physically probed the posterior
cruciate ligament, noting that it was intact. (Ex. No. 1, September 11,
1990 operative report; Iwersen Dep. 13 at 13-18.)

12. The medical history is
interrupted here and will be picked up later in these findings.

13. In an agreement executed
in March, 1991, and approved by an Order of the Department of Labor and
Industry dated April 26, 1991, the claimant and State Fund entered into
a Permanent Partial Wage Supplement Compromise and Release Settlement.
The Settlement Agreement stated that "the parties to this matter have
agreed to fully and finally conclude all compensation and/or rehabilitation
payments due the claimant" in consideration of a $29,000.00 lump sum payment
and $10,325.73 payable in bi-weekly payments. Claimant reserved medical
and hospital benefits.

14. Claimant understood that
he could not receive further benefits as the result of the settlement.

15. Claimant is now attempting
to reopen the settlement agreement based on mutual mistake of fact. He
contends that he and the State Fund were unaware that he had suffered
a tear of his posterior cruciate ligament. He also contends that they
erroneously believed that he could return to work.

16. Claimant's assertion that
the parties were mistaken concerning his ability to return to work will
be addressed first. Prior to the settlement, Dr. Iwersen approved his
return to sedentary work. After the dust has cleared,
and the final medical opinions are in, he is still approved
to return to sedentary work. Dr. Lonnie Paulos, who is
now treating claimant, testified that he can perform sedentary work. (Paulos
Dep. at 50.) While claimant may dispute his own ability to work, he was
medically approved for sedentary work both before and after the settlement.

17. Claimant's allegations
concerning his torn posterior cruciate ligament rests on the testimony
of Dr. Paulos, a respected knee surgeon, who performed further surgery
on claimant's knee in the fall of 1992 and winter of 1993, and who testified
by deposition. The State Fund's counter to that testimony is the deposition
testimony of Dr. Iwersen and Dr. David F. Friedrick, an orthopedic surgeon
retained by the State Fund as an expert witness, and the trial testimony
of Dr. Randale Sechrest, an orthopedic surgeon. Dr. Sechrest was also
retained by the State Fund as an expert witness. He performed a comprehensive
review of medical records, the depositions of both Dr. Iwersen and Dr.
Paulos, physical therapy records, Mr. Sanford's deposition and Dr. Iwersen's
videotapes of his surgeries. Since he testified in person at trial, the
Court had the opportunity to personally assess his testimony. I find his
testimony to be credible, persuasive and convincing.

19. Dr. Iwersen reconfirmed
his diagnosis in a December 20, 1990 office note, which stated:

The pt. was in today, long
discussion and another exam. I think that basically, he has lateral
and posterolateral instability. He has a difficult problem
with this and we may be able to help him with a lateral reconstruction
but I wouldn't mind getting an opinion from one of the knee surgeons
in Salt Lake or Seattle as this is quite an unusual problem. He, on
the other hand, would like to be rated and end all this. He has been
helped with the brace and is tired with surgery, though I think we could
help him with a reconstruction of his lateral collateral ligment[sic].
He does not wish this at this time, so I will rate him and see him on
a PRN basis.

(Ex. No. 1, emphasis added.)

20. In discussions occurring
prior to the April 1991 settlement, Dr. Iwersen told claimant that he
had posterolateral instability, that the problem was a difficult one,
and that additional surgery was likely. He told claimant that he had an
unstable knee and that his ligaments were damaged. (Iwersen Dep. at 38-40.)
He also recommended that claimant seek help from specialists in Salt Lake
City or Seattle. (Iwersen Dep. at 36-37.)

21. In a December 20, 1990
letter to State Fund claims examiner Lisa Gray, Dr. Iwersen stated that
he recommended reconstruction of the lateral collateral ligament, but
that claimant did not wish to have this reconstructed and "feels at this
time he can handle this himself and would just like to settle his case
and get on with other things." (Ex. No. 1.)

22. At the time of settlement,
the claimant did not want to submit to additional surgery and pressed
for a final settlement of his claim. In his own testimony claimant acknowledged
that at that time he was aware that his knee could require further surgery,
and that Dr. Iwersen had suggested getting another opinion from a specialist
in Salt Lake City or Seattle. He also acknowledged that he did not want
to submit to the collateral ligament surgery suggested by Dr. Iwersen,
and that he wanted to end it all and bring his claim to closure. (Sanford
Dep. at 31-34.)

23. In a memo made contemporaneously
with the settlement, the State Fund's claims examiner wrote:

Claimant has also been treated
by Dr. Michael Sousa who also agreed with Dr. Iwersen that a reconstruction
of his knee ligament would be in the best interest of the claimant.
Due to the claimant having previous surgeries, he does not care to participate
in another one.

(Ex. No. 5, March 28, 1991
memo of Lucinda Dixon.)

24. Dr. Paulos picked up claimant's
care in the fall of 1992. He first saw claimant on September 23, 1992.
He performed an arthroscopy on September 29, 1992 and a posterolateral
reconstruction of the right knee on January 28, 1993. Dr. Paulos found
claimant's posterior cruciate ligament to be partially torn. He testified
he found scar fiber in the PCL, and that he believed when Dr. Iwersen
saw an intact PCL, it had been torn but had healed to reestablish its
physical presence. (Paulos Dep. at 36-37.)

25. Dr. Paulos gave his opinion
that the PCL was the result of the claimant's 1989 injury and that he
did not believe Dr. Iwersen "picked up the ligament damage" (Id.
at 14) referring to claimant's PCL tear, lateral collateral ligament tear
and posterolateral ligament complex tear. Dr. Paulos also felt Dr. Iwersen
"did not appreciate the instability of Mr. Sanford's knee." (Id.
at 18.)

26. Dr. Paulos had not read
the deposition of claimant or claimant's wife, had not previously been
informed that in January 1992 claimant had fallen downstairs, did not
have the medical records of Dr. Sousa, did not have or review the videotapes
of Dr. Iwersen's prior surgeries, and did not have any physical therapy
records.

b) While Dr. Iwersen may
not have initially diagnosed instability of the knee, he did so by December
1990 prior to settlement, and his diagnosis did not change thereafter.

c) Dr. Iwersen explained
that posterolateral instability, as diagnosed in December 1990, involves
a "complex of ligaments that are incompetent. It's not just one particular
thing that is incompetent." (Iwersen Dep. at 24.) He disputed the contention
that it was crucial for him to specifically identify a tear of the posterior
cruciate ligament in making the diagnosis or treating Sanford's instability.

[W]hether you have a complete
tear of your posterior cruciate ligament to me doesn't -- That's not
crucial. What is crucial is that he has this instability problem that
is going to be disabling . . . [a]nd the posterior cruciate to me
just -- It doesn't mean anything. What has happened is Dr. Paulos
elected to reinforce that posterior cruciate ligament in order to
take care of this posterolateral instability.

(Id.
at 23:12-21). He went on to explain:

Q: Help us understand
why the PCL is not the point, not the crux of this case.

A: Because there is more
than one ligament involved in his instability.

Q: Go on.

A: And more than one soft
tissue structure.

Q: Go on.

A: And they all need to
be looked at and addressed, and even though you may not recognize
one of the structures are damaged, if he has this instability, you
need to address all of them. So, if the MRI shows that PCL is okay,
you still may need to tighten up the PCL in order to -- because it
may be just stretched from within.

Q: Okay. And so the diagnosis
of posterolateral and lateral instability includes a complex of structures---

A: Ligaments.

Q: --within the knee;
is that right?

A: Yes.

Q: And it may be necessary
to tighten one, see if that works; if it doesn't work, go back and
tighten another?

A: Yes.

Q: And that's why you
remark, even if the MRI shows an intact posterior cruciate, as time
goes on you may have to go back and reconstruct it or tighten it up.

A: Yes. (Id.
at 62-63).

Dr. Iwersen testified that
his diagnosis of claimant's lateral and posterolateral instability was
the same diagnosis or problem that Dr. Paulos addressed. (Id.
at 41:19-22).

d) Dr. Sechrest's in-court
testimony, which the Court finds credible and persuasive, confirmed
that knee instability, and particularly posterolateral instability,
is usually the result of a combination of injuries and is described
in terms of a functional diagnosis. He further testified that specific
identification of a tear to the PCL may be important in determining
a specific surgical remedy but is not significant in determining the
nature and significance of the injury. The Court finds that testimony
persuasive.

e) It is more likely than
not that the PCL tear identified by Dr. Paulos was caused by Sanford's
January 1992 fall down the stairs at home. Both Dr. Sechrest and Dr.
Friederick reviewed videotapes of Dr. Iwersen's first two surgeries
as well as a physical therapy report following Sanford's January 1992
fall. Based on their review of those items, as well as other records
and depositions, they testified that it was more probable than not that
the PCL damage occurred as a result of the January 1992 fall down the
stairs. Prior to the fall down the stairs, claimant's knee popped out
"hundreds of times." (Sanford Dep. at 61.) The fall down the stairs,
however, was different in degree. Claimant described his fall as follows:

A: That's the worst time
because the knee -- the knee popped quite a ways out. It wasn't just
a little. It wasn't just a slide. It was an out.

Q: And that one really
put you down?

A: Yes.

(Sanford Dep. at 65-66.)

Dr. Friedrick observed videotapes
of the 1990 arthroscopies and opined that Dr. Iwersen's probings of the
PCL were inconsistent with the existence of a PCL tear at that time. (Friedrick
Dep. at 11-12.) Dr. Iwersen did not express an opinion but pointed out
that falling down the stairs did not cause Sanford's instability, which
already existed, and that the fall could have caused a PCL tear or further
tear.

28. Through Dr. Iwersen's letter
to claims examiner Lisa Grey, the State Fund was informed that Sanford
had an unstable knee and was suffering from posterolateral instability.
State Fund was also informed of Dr. Iwersen's recommendation of surgery
and further evaluation.

29. The nature of Sanford's
knee instability did not change following the settlement agreement. Claimant
testified in his deposition that the instability of his knee had not substantially
changed between 1990 and Dr. Paulos' January 1993 surgery. Dr. Paulos'
surgery has helped but has not eliminated the instability.

CONCLUSIONS OF LAW

1. This Court has jurisdiction
over this proceeding pursuant to section 39-71-2905, MCA.

2. The claimant is seeking
to set aside an April 26, 1991 settlement agreement on the basis of mutual
mistake of fact. He alleges two mistakes. First, he claims that both he
and the State Fund were mistaken as to his ability to return to any sort
of employment. Second, he asserts that his knee condition was misdiagnosed
and that the parties were unaware that he had torn his PCL.

Numerous decisions of the
Montana Supreme Court have held that a full and final compromise settlement
agreement made when the parties are operating under a mutual mistake of
fact must be set aside or reopened. The cases are discussed in this Court's
recent decision in Pettit v. State Compensation Insurance
Fund, WCC No. 9305-6781 (December 29, 1993),
wherein a settlement agreement was set aside for mutual mistake of fact
based on a misunderstanding of the nature of claimant's condition, which
had been diagnosed as a low-back condition but later determined to be
a sacroiliac joint condition.

For completeness of this opinion,
the Court will again review the basic law governing the reopening of full
and final compromise settlement agreements. The cases in which agreements
have been set aside are Kienas v. Peterson, 191
Mont. 325, 624 P.2d 1 (1981); Weldele v. Medley Development, 227
Mont. 257, 738 P.2d 1281 (1987); Kimes v. Charlie's Family Dining
& Donut Shop, 233 Mont. 175, 759 P.2d 986 (1988); Wolfe
v. Webb, 251 Mont. 217, 824 P.2d 240 (1992). Cases in which
reopening has been denied are Solie v. Peavey Co., 212
Mont. 197, 686 P.2d 920 (1984); Whitcher v. Winter Hardware Co.,
236 Mont. 289, 769 P.2d 1215 (1989) and Hartfield v. City of Billings,
246 Mont. 259, 805 P.2d 1293 (1990). The standard applied in these
cases is based on contract law. Wolfe at
227. "General contract law gives courts the right to reopen a compromise
settlement when there has been a non-negligent mutual mistake of material
fact." Kimesat 177. The more particular
legal test, applied in such cases is articulated by the seminal case,
and is whether "[t]he parties were laboring under a material mistake
as to the nature of and the extent of claimant's injuries." Kienas,
191 Mont. at 330 (emphasis added) accord Wolfe, 251 Mont.
at 227-228.

Kienas
involved a back injury. The settlement was set aside because it was based
on a medical assessment which did not take into consideration the effect
of the injury on the claimant's pre-existing cerebral palsy. The pre-settlement
impairment rating was based solely on the back injury, and neither party
was aware at the time that the injury could aggravate or accelerate the
cerebral palsy. In Kimes "a new and different
medical problem was discovered after the settlement." Whitcher,
236 Mont. at 294. Since the injury in Kimes
involved the knee, a more detailed discussion of that case will follow.
In Weldele the Supreme Court "allowed a reopening
of the settlement where the claimant's initial condition deteriorated
substantially and the treating physician's initial assessment was a misdiagnosis
of the actual extent of the injury." Whitcher,
Id. at 294. The pre-settlement diagnosis was carpal tunnel syndrome
and a rotator cuff injury. After the settlement claimant's physicians
determined that he was in fact suffering from thoracic outlet syndrome.
In Wolfe the claimant suffered an injury to
his right clavicle. After settlement his physicians discovered that he
also suffered from previously undiagnosed damage to his right shoulder.

Kimes
warrants further discussion here because it involved a knee injury and
a reopening of the settlement. Pre-settlement, the claimant had undergone
surgery for a torn cruciate ligament. Post-settlement, it was discovered
that he had also suffered a torn meniscus, which is the cartilage which
protects the knee joint. The torn meniscus was especially significant
because it created the conditions for "probable degenerative changes in
his knee joint," 233 Mont. at 178, adding a new dimension to
the prognosis for claimant's knee.

In the present case claimant
had multiple knee problems, all of which were recognized prior to the
settlement agreement. He had his meniscus removed in 1979, thus predisposing
his knee to degenerative changes. He had a painful patella. Finally, his
physicians had identified, and he was aware that he had, instability due
to lax ligaments which had been torn or stretched. While his treating
physicians may not have identified all of the specific ligaments involved,
the basic nature of his condition was recognized. In this regard, this
case differs from Kimes, where the involvement
of the meniscus was not identified prior to settlement. Sanford's need
for ligamental surgery was also recognized prior to the settlement, although
his physician recommended addressing a different ligament than did Dr.
Paulos. It is also more likely than not that the PCL tear ultimately found
by Dr. Paulos was the immediate result of claimant's fall down the stairs
in January 1992. On the other hand, the PCL tear did not change his basic
condition. His knee was already unstable and popping out.

Mr. Sanford also should not
be allowed to complain of any failure to more particularly identify the
anatomical components of his knee problems since he refused advice that
he seek further evaluation and surgery. It was, after all, he who refused
Dr. Iwersen's recommendations and insisted on settlement.

Claimant's employment prognosis
has not changed. He offered testimony that he has tried to obtain employment
at "quite a few places" but has been unable to get a job. However, his
inability to secure a job does not mean that he is medically unable to
return to work. The medical testimony by Dr. Paulos and Dr. Iwersen is
that claimant is capable of returning to sedentary employment.

Claimant has the burden of
proving his case by a preponderance of the evidence. Dumont
v. Aetna Fire Underwriters,183 Mont. 190, 598 P.2d
1099 (1979). He has failed to sustain that burden. Based on an application
of case law to the facts of this case, we find that there was no mutual
mistake of fact warranting a reopening of the April 26, 1991 settlement
agreement.

3. Claimant is not entitled
to attorney fees or costs.

JUDGMENT

1. This Court has jurisdiction
over this matter pursuant to section 39-71-2905, MCA.

2. Claimant has failed to establish
that the Compromise and Release Settlement approved on April 26, 1991
was based on mutual mistake of fact. There is no basis to set the agreement
aside. Claimant's petition is therefore dismissed.

3. Petitioner is not entitled
to attorney fees and costs.

4. The JUDGMENT herein is certified
as final for purposes of appeal pursuant to ARM 24.5.348.

5. Any party to this dispute
may have 20 days in which to request a rehearing from these Findings of
Fact and Conclusions of Law and Judgment.